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Monday, November 10, 2003

Who Paid for my Education

A warm welcome to Satya.

Edward in his post to welcome Satya touches on a topic that is very close to my heart. I wrote about the topic of funding of higher education in India a couple of years ago and asked Who Actually Paid for my Education. Here is an excerpt that is remarkably close to what Edward has proposed:

... It [the migration of educated Indians] is totally
indistinguishable from a gift of $100,000 from India to the US when an
engineer trained in India migrates to the US. Just like capital flight
from poor nations to rich nations, it is human capital flight from the
poor nation to the rich. It constitutes a subsidy that is hard to
estimate but my rough calculations put it around $2 billion a year.
(References available upon request.)

Why a resource drain? Because we are short of money that is used to
educate people. We are not short of people. So if an educated person
leaves, we lose what we have invested in his or her education. This
would not be that great a loss if he or she had paid full price for the
education received. But we don't charge full price. We subsidize higher
education. That is also not that great a crime. The problem is that we
differentially subsidize higher education and neglect primary education.
The beneficiaries of this 'caste' system is that higher education is
only available to upper socio-economic classes.

A brief solution to the problem of full-cost pricing is easy to state:
Price all higher education at full cost. If a year of engineering school
costs Rs 3 lakhs, price it at that. Then give loans to every student
that needs it to pay the price. The loan is repayable upon employment
and in terms commensurate with the level of employment. If you earn big
dollars in the US, pay in big dollars. If you work as a doctor in a
small rural village in India, pay small amounts in rupees. Essentially,
once the loan system is put in place, you do away with subsidies as it
becomes self-sustaining in 4 or 5 years.

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